Comments on development initiatives paper on Final ODA data for 2016 and the challenges

This year will see the Secretary General host a Sustainable Finance Summit for the SDGs in September. This will by its nature address how to broaden the way we fund the SDGs. I will be doing a number of blogs this year to address some of the new areas that funding could come from while also raising cautions or concerns about how that could impact on the landscape of stakeholders.

to start with lets lookat where we are with development funding. A very good development initiatives fact sheet arrived in my intray over the weekend which makes fascinating reading. It happened at the same time as an interesting email came in too. It was from Mark Ritchie former Minnesota Secretary of State who pointed out a very interesting interview with Kevin Watkins the CEO of Save the Children Fund (UK) and on the page I found a link to a very interesting blog on the Oxfam page by Duncan Green on the 10 top thinkers on Development summarized in 700 words by Stefan Dercon.

All three are well worth reading and each took me out of the normal day to day forest of work and made me think. I will address all three in blogs in the coming weeks. To start with let’s look at the excellent development initiatives fact sheet on ODA.

development initiatives

This really useful background fact sheet “Final ODA date for 2016: an initial analysis”.  
It is for OECD countries so excludes Turkey (USD $6.2 billion [0.79 of GNI), China ($6.9 billion 2014) and UAE ($4.39 billion 2015 [1.09% GNI]) who all give significant aid wither as % or as a total amount.

In 2016 the USA gave $34.4 billion (0.18% GNI) and this is likely to fall further in 2017 it is worth noting that in 1963 under President Kennedy the USA gave 0.6% GNI.

The OECD average is 0.32% GNI to put it all into perspective. The only Western European country that is below the USA in % terms is Greece  0.14% GNI - but this also represents a huge 54.7% increase on 2015 so it is starting to get oover some of its financial problems.

There are now six OECD countries giving more than 0.7% GNI (UK, Germany, Sweden, Denmark, Luxembourg and Norway). But the interesting issue is that Turkey and UAE are also giving more than 0.7%

Key facts from the development initiatives report include:

1. Net ODA from DAC donors rose in 2016 by over 10% to a new record high of US$145 billion.
2. Part of the rise was due to a continued rapid increase in in-donor refugee costs reported as ODA.
3. Even if increases in refugee costs are excluded, total net ODA still grew by US$10 billion (in real terms) compared with 2015.
4. Other factors driving the rise in ODA were: increased core multilateral ODA, a rise in support for specific-purpose funds and increased debt relief (due mostly to Spain’s rescheduling of Cuba’s debt).
5. Ethiopia has replaced Afghanistan as the single largest recipient of total ODA from DAC members and multilateral institutions, while Afghanistan remains the largest recipient of bilateral ODA.
6. Non-transfer ODA – which includes in-donor refugee costs – was the modality that increased the most between 2015 and 2016.
7. Recipient governments continue to be the largest channel of delivery for ODA, accounting for over half of total ODA from DAC members and multilateral institutions. Private sector institutions (a new channel reporting code introduced this year) accounts for 4% of bilateral ODA from DAC members and multilateral institutions (US$6.6 billion). (development initiatives, 2018)
8. It’s clear that the delivery of the SDGs will need private sector funding as the amounts that are being quoted to deliver the SDGs are in the region of $3-5 trillion a year which dwarfs ODA contributions by more than a factor of 10.    
9. The reposition of aid around the SDGs is still early days. If you imagine that the SDGs were agreed to in September 2015 which means for most governments most funding priorities would not change until 2016 when they would produce budget commitments around those new priorities which would mean that funding could be applied for in 2017 but probably in many cases not actually funding too much before 2018.

Back to the report

Some countries have had a large increase in their ODA contribution these are: Austria (22.2%),
Belgium (19.3%),
Czech Republic (28.8%),
Greece (54.7%),
Hungary (28.8%),
Iceland (30.5%),
Italy (25.9%),
Korea (18.1%),
Poland (56.7%),
Slovak Republic (25.5%),
Spain (205.2%)
EU Institutions (24.3%) and 
Germany (36.4%) and now joining the 0.7% club though more than half of this was due to refugee costs.

Overall development aid reached a new peak of USD 142.6 billion in 2016, an increase of 8.9% from 2015 after adjusting for exchange rates and inflation. There was a rise in aid spent on refugees in donor countries boosted the total – but even stripping out refugee costs aid rose 7.1%, according to official data collected by the OECD Development Assistance Committee (DAC). (OECD, 2018)

Even with this there is bad news, the 2016 data shows that bilateral aid to the least-developed countries actually fell by 3.9% in real terms from 2015 and aid to Africa fell 0.5%, “as some DAC members backtracked on a commitment to reverse past declines in flows to the poorest countries.” (OECD, 2018)

At this point only 4% of ODA is channeled through the private sector but this was a new category in the DAC Report and will probably only grow in the future. Public Private Partnerships (PPP) at this point are also showing only a small amount of ODA going to them again one could imagine some blended finance using ODA funds for PPPs in the future.
The Addis Ababa Action Agenda (AAAA) defines “blended finance” as activities that combine “concessional public finance with non-concessional private finance and expertise from the public and private sector, special-purpose vehicles, non-recourse project financing, risk mitigation instruments and pooled funding structures.” As noted in the Addis Agenda “an important use of international public finance, including ODA, is to catalyse additional resource mobilization from other sources, public and private” (Addis, paragraph 48 and 54)

There is already work being undertaken by the UN Economic Commission for Europe ona  set of Principles.

Principle Number 1: People first PPP

Principle Number 2 – Policy first for people first projects

Principle Number 3 - Improving Capacity Building

Principle Number 4 – Strengthening Accountability

Principle Number 5: Risk-Sharing and De-Risking

Principle Number 6: Procurement: Value for People, Planet and Prosperity

Principle Number 7: The Environment

Principle Number 8 – Innovative Financing – ‘Doing well by doing good’

The need for a serious conversation in New York around Principles for PPPs for SDGs is urgent. There have been some very good workshops but member states need to grasp this now before the process spirals out without embedding firm principles that PPPs can be measured by. Help is needed to help developing countries and in particular sub-national governments to negotiate PPPs with the private sector. A level playing field is needed. Could this be something that UNCTAD could set up?

NGOs have been slow to put ideas forward on Principles for PPPs mostly just opposing them. The Communitas Coalition produced a discussion paper on this in 2016 on what some Principles might look like:

Objectives of PPPs

PPPs should result in improved outcomes for end users and citizens, through improved service quality, accessibility and

PPPs should be consistent with and support the long-range sustainable development plans of the public

Conditions of Suitability

The following conditions need to be met in order for the local/regional authority to successfully engage in a PPP:

Need “sound enabling environment” – rule of law, high standards of public and corporate governance including: fair competition laws, transparency, accountability and enforcement mechanisms, and adequate anti-corruption

Public authority must have the capacity to negotiate and independently oversee implementation of PPP on an equal basis with private sector

Public authorities should evaluate the potential life-cycle costs, benefits, and risks of a range of available infrastructure financing and management alternatives, including a careful “Value for Money” analysis, comparing the financial impacts of the PPP option against those of a traditional public financing

Transparency measures should be maintained throughout the lifecycle of the project, including full and proactive public disclosure of PPP agreements, with specific accountability instruments that establish performance-based responsibilities of all parties. Governments should include PPPs in national accounts rather than off- balance sheet, so they are part of debt sustainability

Meaningful and sustained consultation with and participation of end-users and other (local) stakeholders in decision making through a deliberative process, from design to implementation and evaluation, including prior to infrastructure project

Contracting Provisions

Appropriate (equitable) risk sharing should be included, based on assessment of public interest, with caution concerning any public sector

Payment modalities and return should be commensurate with investment risk allocation. Remuneration to the private party(ies) should be linked to predetermined, mutually-agreed performance

The sources of revenue to pay the private partner should be clearly identified and made transparent from the outset of a

Employment preference should be specified for local labor and, where it exists, for unionized labor to ensure health and safety protections, honor prevailing wage rates, and maintain benefit commitments (e.g., pensions, holidays). At a minimum, jobs created must abide by the ILO’s decent work

Responsibilities concerning social and environmental aspects of the projects should be clearly identified, as well as risk allocation in case of unforeseen

Clear, independent performance monitoring and reporting mechanisms must be identified, including provisions to monitor private partner(s)’ observance of human rights principles and coherence with the Sustainable Development Goals (SDGs).

Include clear, mutually acceptable dispute resolution procedures as well as defined mechanisms for renegotiation, with full public disclosure of renegotiation process and results.

Clearly identify the grounds and procedures for terminating the partnership, with full disclosure of the terms of termination within the PPP.

Back to the development initiative paper having the information of how ODA is being spent and also that more and more countries are moving towards the 0.7 GNI for ODA is good news. But the big questions on mobilization the trillions for deliverign the SDGs in a period where the world is looking increasing insecure and the US has abdicated any leadership role is very worrying. There is no question in my mind that the negotiations of the SDGs and the Paris Climate Agreement represents some of the best that multilateralism can do. Even in bad times we have a road map – some may take the wrong path sometimes, but the rest of us whether its governments, the UN or stakeholders should continue to work together to deliver those commitments.And work for a sustainable, fair, equitable, demoractic and just world.